Of­ten­times, the terms in­sol­ven­cy and bank­rupt­cy are used in­ter­change­ably. How­ev­er, in T&T, in­sol­ven­cy and bank­rupt­cy have dis­tinct mean­ings, al­beit they gen­er­al­ly hint at sim­i­lar cir­cum­stances. This ar­ti­cle will pro­vide a spot­light on bank­rupt­cy and how the law gov­ern­ing it can per­son­al­ly im­pact an in­di­vid­ual.

WHAT IS BANK­RUPT­CY

In 2014, the Bank­rupt­cy and In­sol­ven­cy Act, Chap­ter 9:70 (the “BIA”), was pro­claimed, and all parts ex­cept Part XI (which deals with In­ter­na­tion­al In­sol­ven­cies) were brought in­to ef­fect. It was said that the leg­is­la­tion’s pri­ma­ry aim re­lat­ed to the re­ha­bil­i­ta­tion of cor­po­rate and in­di­vid­ual debtors alike who found them­selves in fi­nan­cial dif­fi­cul­ties. Bank­rupt­cy is a pro­ce­dure un­der the BIA, which is de­signed to make avail­able fi­nan­cial re­lief to in­di­vid­u­als, cor­po­ra­tions, and part­ner­ships who are fac­ing in­sur­mount­able debt bur­dens. Im­por­tant­ly, it pro­vides an av­enue through which the debtor can ei­ther elim­i­nate or re­pay their debts whilst be­ing pro­tect­ed by the court. This is ac­com­plished by the halt­ing of le­gal ac­tions of cred­i­tors (ie, a stay of pro­ceed­ings). The fol­low­ing terms, which ap­pear fre­quent­ly in the BIA, are worth not­ing:

• As­sign­ment—speaks to the process where a fi­nan­cial­ly dis­tressed par­ty would trans­fer its as­sets to a third-par­ty fidu­cia­ry (typ­i­cal­ly a trustee) for liq­ui­da­tion and dis­tri­b­u­tion to cred­i­tors.

• Bank­rupt—means a per­son who has made an as­sign­ment or against whom a re­ceiv­ing or­der has been made un­der Sec­tion 5(10) of the BIA.

• In­sol­vent per­son—A per­son who is not bank­rupt and whose li­a­bil­i­ties to cred­i­tors are prov­able as claims un­der the BIA amount to not less than four thou­sand dol­lars.

• Debtor—an in­sol­vent per­son and any per­son who, at the time an act of bank­rupt­cy was com­mit­ted by him, resided or car­ried on busi­ness in Trinidad and To­ba­go and, where the con­text re­quires, in­cludes a bank­rupt.

• Re­ceiv­er—means a per­son who has been ap­point­ed to take, or has tak­en, pos­ses­sion or con­trol of all or sub­stan­tial­ly all of the in­ven­to­ry, ac­counts re­ceiv­able, or oth­er prop­er­ty of a debtor that was ac­quired for, or is used in re­la­tion to, a busi­ness car­ried on by the debtor.

• Re­ceiv­ing or­der—means an or­der of the Court made un­der any law that pro­vides for or au­tho­ris­es the ap­point­ment of a re­ceiv­er or a re­ceiv­er-man­ag­er.

PER­SON­AL BANK­RUPT­CY

The bank­rupt­cy process is ini­ti­at­ed by fil­ing a pe­ti­tion in the High Court. In said pe­ti­tion, there will be a va­ri­ety of in­for­ma­tion that will need to be in­clud­ed—per­son­al in­for­ma­tion and a state­ment of af­fairs (as­sets and li­a­bil­i­ties, in­come and ex­pens­es) must be pro­vid­ed. Gen­er­al­ly speak­ing, per­son­al bank­rupt­cy is vol­un­tary—ie, where the debtor takes the lead.

In vol­un­tary bank­rupt­cy pro­ceed­ings, debtors ei­ther make an as­sign­ment to the ben­e­fit of their cred­i­tors or they present a bank­rupt­cy pe­ti­tion to a court. In some in­stances, cred­i­tors may sub­mit pe­ti­tions re­gard­ing the debtor.

These bank­rupt­cy pro­ceed­ings are in­vol­un­tary in na­ture. Sec­tion 5 of the BIA pro­vides that where the debtor has com­mit­ted an act of bank­rupt­cy and the amount owed by the debtor is not less than $10,000.00, their cred­i­tors are em­pow­ered to file a pe­ti­tion for a re­ceiv­ing or­der to the court with­in six months of the act of bank­rupt­cy. Sec­tion 4 of the BIA out­lines the rel­e­vant acts of bank­rupt­cy – some note­wor­thy ones in­clude where:

• The debtor makes a trans­fer or as­sign­ment of their prop­er­ty to a trustee for the ben­e­fit of their cred­i­tors;

• The debtor makes a fraud­u­lent trans­fer of their prop­er­ty;

• The debtor makes any trans­fer of their prop­er­ty or cre­ates any charge there­on, which would un­der the Act be void if they were ad­judged bank­rupt;

• The debtor gives no­tice to any of their cred­i­tors that they have sus­pend­ed or in­tend to sus­pend pay­ment of their debts; and

• With in­tent to de­lay cred­i­tors, the debtor de­parts Trinidad and To­ba­go, de­parts their dwelling house, or oth­er­wise makes them­selves ab­sent. Fol­low­ing the fil­ing of the pe­ti­tion, the court, if it deems it nec­es­sary, may ei­ther grant a bank­rupt­cy or­der (in vol­un­tary pro­ceed­ings) or make a re­ceiv­ing or­der (in in­vol­un­tary pro­ceed­ings).

Ac­cord­ing­ly, a trustee will then be ap­point­ed to man­age the bank­rupt­cy process.

The role of the trustee is to over­see the liq­ui­da­tion of as­sets and there­after, dis­trib­ute the pro­ceeds to cred­i­tors. Pro­vid­ed that the terms of bank­rupt­cy are com­plied with, the in­di­vid­ual may re­ceive a dis­charge, re­leas­ing them from the oblig­a­tion to re­pay most of their debts.

The dis­charge process and time­line vary de­pend­ing on the cir­cum­stances and com­pli­ance with the bank­rupt­cy rules. How­ev­er, it is worth not­ing that de­clar­ing bank­rupt­cy may neg­a­tive­ly im­pact the in­di­vid­ual’s fu­ture em­ploy­ment op­por­tu­ni­ties. More­over, in­di­vid­u­als are pre­vent­ed from be­ing a di­rec­tor of a com­pa­ny whilst bank­rupt in Trinidad and To­ba­go.

Bear­ing this in mind, al­though bank­rupt­cy can aid in pro­vid­ing an in­debt­ed in­di­vid­ual with a fresh start, it is im­por­tant to seek pro­fes­sion­al ad­vice to de­ter­mine whether it is the right op­tion for you.

Sub­mit­ted by: Isa­iah Fer­gu­son, Le­gal Of­fi­cer, Civ­il Le­gal De­part­ment, Le­gal Aid and Ad­vi­so­ry Au­thor­i­ty, 23 Stan­more Av­enue, Port of Spain. Con­tact: 638-5222 Email: in­fo@laaa.gov.tt Web­site: www.laaa.org.tt This ar­ti­cle is not le­gal ad­vice. Con­sult an at­tor­ney for le­gal is­sues.